The announced entry into Canada by U.S. video streaming firm Netflix has been described as a market-disrupting move by some industry observers but a local content provider and a streaming platform developer are unfazed by the development.

The popular American company announced July 19 that it will offering movies and televisions shows in Canada for a flat-rate monthly fee beginning this fall. But Netflix said they will not be shipping DVDs through the mail like they do in the U.S.

There’s tremendous brand recognition for Netflix in Canada which the firm can count on, according to Emily Taylor, analyst for the customer segment group at analyst firm IDC. “Streaming TV and movies is still at the early stages in Canada but Netflix will definitely have a disruptive effect on the prevailing business models and distribution channel locally,” she said.

Movie rental companies from the giant Blockbuster Inc. to smaller mom and pop corner video stores will likely experience some reduction in sales, according to the IDC analyst.

“Sales are not going to disappear overnight. It will more likely be gradual erosion as more viewers warm up to the idea of streaming video,” explained Taylor.

Canadian small and medium-sized businesses in the video streaming field need to develop niche services and products in order to protect themselves from big players, she said.

Taylor, who specializes in consumer technology trends, said incumbent cable channels such as Rogers, Shaw and Videotron will have to adjust their strategies. “There’s definitely big competition coming their way.”

In January, Rogers Communication added live streaming and social media features to it fledging online video portal Rogers On Demand Online that launched in November.

Streaming out of the GlassBox

Interestingly, one local video streaming firm which has ties with Rogers is not worried by the competition presented by Netflix.

“I think competition is what we need in Canada,” says Raja Khanna, president of Toronto-based GlassBox Television.

Apart from providing local consumers with more content to choose from, Khanna said, a big brand outfit like Netflix could go a long way in enticing more Canadians to try out streamed TV programs.

GlassBox Television, producer of music video channel AUX.TV isn’t a bit worried that Netflix is coming to town.

GlassBox is a cross-platform digital broadcasting provider that develops its own content. The company’s BITE TV provides comedy content while its AUX.TV, music channel is carried on Rogers Cable. The company also focuses on providing video content to computer and mobile device online through its own Web site.

With more than 2 million TV viewers and an additional 1 million visitors to its site, GlassBox is not at all worried about Netflix coming into town, Khanna says. The Toronto-based firm is not playing in streaming video’s retail field.

Back in 2005, the company released two licensed TV shows to Internet viewers. Today MoboVivo has a library of more than 26,000 TV episodes and licences shows such as The Tudors and The Hour plus a host of specialty channel and niche products. The company licences and distributes television shows, movies and music for delivery on portable devices such as Apple TV, laptops, iPods Nintendo Wii, XBox, iPhone, Sony PSP, and now the iPad.

MoboVivo charges $2 to $3 per download and as much as 60 to 70 per cent of its customers use an iPod or iPhone to view their video.

Netflix hasn’t released its prices for Canada yet, but the company charges U.S. customers a fee of $9 per month.

Still Alex Gault, vice-president of marketing and sales for the Calgary start-up, is hardly quaking in his boots. “Although we’re also a store, much of our business comes from leveraging our technology,” he said.
MoboVivo’s strength is in developing applications that enable other businesses such as broadcasters and TV producers to stream video to a wide host of devices.

“The likes of Rogers and Shaw aren’t gonna be happy with Netflix, but they knew all along something like this was bound to happen sometime,” said Gault.

Stiff competition may be appearing along the horizon for Shaw and Rogers, but there could be a few hurdles along Netflix’s path as well, according to Gault.
Chief among them, he said, is obtaining the distribution licenses in Canada for Netflix’s content catalogue.

“They may have the license to air these movies or shows in the U.S. but Shaw and Rogers probably hold rights to them in Canada,” said Gault. “This was precisely the same difficulty that Hulu ran into earlier when it sought to come here.”

Taylor of IDC also believes Netflix will probably need to develop a Canada-relevant library. “Demand for something like this might come from consumers or even by way of Canadian-content requirement from the government.”

Taylor, however, credits Netflix for its sense of timing. She said a number of Canadian companies have been offering video streaming services but they entered the market when prevailing technology was not yet up to snuff.

“Today we have improved bandwidth capabilities, sleek and powerful mobile devices like the iPad and stronger consumer demand,” Taylor said.